World Bank approves $800m loan

The World Bank has approved $800 million in loans to finance Pakistan’s budget deficit after the government accepted conditions like increasing electricity prices to reduce circular debt and giving targeted subsidies - measures the lender said would increase poverty in the country. The board of directors of the World Bank approved financing for two programmes - Pakistan Programme for Affordable and Clean Energy (PACE) and the second Securing Human Investments to Foster Transformation (SHIFT-II), totalling $800 million, stated the World Bank. The board approved the $400 million PACE loan only after the government accepted at least six prior conditions like ensuring reduction in power generation cost, competitive bidding for all new power generation projects, shift to clean energy, Rs1.95-per-unit increase in electricity tariffs, reduction in circular debt and appointing independent boards of power distribution companies, according to World Bank documents. The World Bank, in a statement, said that PACE loan focused on measures to improve financial viability of the power sector and support the country’s transition to low-carbon energy. PACE prioritises actions needed to initiate critical power sector reforms focused on reducing power generation costs, better targeting of subsidies and tariffs for consumers, and improving efficiencies in electricity distribution with the participation of the private sector, it added. The project information document listed six prior conditions for the board meeting. The first prior action was about reducing power generation costs in government generation companies, contributing to reduced consumer tariffs and signalling the government’s commitment to equitable treatment and burden sharing for tariff reduction across all categories of power generation. The second condition was about ensuring competitive bidding for all new power generation, which would lower future electricity costs for consumers through the National Electricity Policy. It was under a World Bank condition that the Council of Common Interests last week approved the National Electricity Policy. But Energy Minister Hammad Azhar took credit for the electricity policy on social media. Project documents showed that the third condition of the loan was that the government would ensure transition to 66% renewable energy by 2030 through the adoption of a least cost generation plan (IGCEP). The government accepted two conditions about rationalising electricity prices and minimising subsidies. The documents stated that the government would break the pattern of non-poor and vested interests benefitting from poorly targeted subsidies, additionally constraining fiscal space, and distorting the subsidy schemes of the government. The prior actions support the Ministry of Finance and Ministry of Energy’s careful management of the financial situation of the power sector in the recovery period of Covid-19, while minimising the impact on circular debt through the notification of re-based consumer tariffs and cabinet approval of the updated circular debt management plan. According to another condition, the government will ensure full authority and autonomy for the boards and management of all distribution companies. “The rationalisation of electricity tariffs and subsidies may have a small negative impact on the private sector and poverty in the short term as consumers will need to bear some of the burden to reduce the circular debt, but this impact is limited,” according to the World Bank. “It added that broadening the base for tariff increases through retargeting of subsidies and rebasing the electricity tariff will mean that some user categories will face increased tariffs,” said the World Bank. In particular, the latest rebase of Rs1.95 per unit applied to all consumers is expected to increase poverty by 0.34-0.50 percentage point, stated the World Bank. The International Monetary Fund (IMF) is seeking a further increase of Rs4.95 per unit in electricity prices, which would mean poverty situation would further deteriorate. However, the lender has cautioned that there were political, macroeconomic, technical design, and institutional capacity risks in implementation of these conditions. Implementation of PA5 (CDMP), especially actions related to consumer tariff increases, budgeting subsidies and transfer of circular debt stock to public debt, is at risk if power costs increase due to higher oil price and rupee depreciation, and if fiscal space is tightened by external shocks, said the lender. “Power sector reforms are critical to resolving Pakistan’s fiscal challenges,” said Rikard Liden, World Bank Task Team Leader for the PACE programme. The World Bank also approved $400 million for SHIFT-II which supports a federal structure to strengthen basic service delivery for human capital accumulation. The programme would help improve health and education services, increase income-generation opportunities for the poor, and promote inclusive economic growth, said the World Bank. The SHIFT-II reforms increase budget reliability for sustainable financing of child immunisation and quality primary healthcare programmes, promote student attendance - especially for children who are out of school due to Covid-related closures - and support data-driven decision-making. The programme supports reforms to encourage women’s participation in the economy by improving working conditions and empowering those in the informal sector. It supports the enhancement of national safety net programmes and better targeting to protect the most vulnerable, building resilience to shocks like the Covid-19 pandemic. “The reforms underpinning PACE and SHIFT can contribute to facilitating sustainable investments and generate welfare gains for those most in need,” said World Bank Country Director for Pakistan Najy Benhassine. Pakistan has already planned to take $17 billion in foreign loans in the next fiscal year. However, the borrowing plan hinges on the country’s ability to remain in the IMF programme, which is again in trouble. Published in The Express Tribune, June 30th, 2021. Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

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Shehbaz skips NA’s crucial budget sitting

The other day, Leader of Opposition Shehbaz Sharif had thundered in his speech in the National Assembly that the opposition would work together and would not allow the PTI government to pass the “anti-people budget” for the next fiscal year. However, when the Finance Bill 2021-22 sailed through the assembly on Tuesday Shehbaz Sharif was absent from the sitting along with a majority of the PML-N lawmakers. During the proceeding, the government showed its strength and defeated the opposition when Minister for Finance Shaukat Tarin moved a motion for taking up the bill with a majority of 172 against 138 votes. PPP Chairman Bilawal Bhutto Zardari while calling the budget approval “unconstitutional and illegal” said “all the PPP members are present” and that “I am responsible for my own party.” The PPP chairman said that he will raise the issue of absence of a number of opposition members with Shehbaz Sharif.” Bilawal said NA Speaker Asad Qaiser had robbed the members of their votes, adding that what had happened in the National Assembly on Tuesday had set a bad precedent. The PPP chairman said the speaker verbally approved the bill and when he challenged a voice vote, the speaker violated the rules and deprived him of his right. “It is sad to say that the speaker has violated the sanctity of the parliament,” Bilawal said.  “Today's budget approval is unconstitutional and illegal and will remain illegal if this mistake is not rectified.” Commenting on the absence of Shehbaz and others in a Twitter post, Bilawal’s sister’s Bakhtawar Bhutto Zardari said her father – former president Asif Ali Zardari – attended both a court hearing and the NA session “despite underlying health conditions.” Read: NA clears budget with majority vote “So did 54 out of 56 PPP members (missing two had Covid). We remain in Pakistan. [However, only] 14 out of 84 members from the PML-N came to oppose the PTI-IMF budget,” she wrote. Responding to the criticism, PML-N Secretary Information Marriyum Aurangzeb also took to Twitter to clarify that the opposition leader could not attend the session due to the death of his cousin, Mian Tariq Shafi, as he was busy with funeral rites in Lahore. Marriyum said the fact is that the opposition could not stop the Finance Bill even if all the opposition lawmakers had attended the session. “The government passed the budget with 172 votes, the bare minimum needed to form a government. “With Akhtar Mengal’s absence and the JI’s abstention, the maximum votes possibly polled by the opposition would be 161. There would be no impact on passage of the Finance Bill.  Cheap point scoring won’t serve any purpose,” she added. Marriyum said the opposition's job is to point out the flaws and shortcomings of a budget. This was the first budget in history in which significant changes were made at the behest of the opposition and the government had to take several U-turns over the proposed budget. “More than 35 amendments were made in the 15 clauses proposed by the opposition in the Finance Bill,” she maintained, adding that there is a massive difference between the budget presented on June 12 and the budget approved on June 29. “The opposition played its constitutional role in the best interest of the people,” she said. “The political rhetoric cannot change this reality.” Time and again, the opposition has ratcheted up pressure on the government inside and outside the parliament but they have been able to bring the government to its knees only once when the prime minister had to take a vote of confidence from the assembly. When the budget session started, the treasury benches did not allow Shehbaz Sharif to open debate on the Finance Bill and drowned him out with jeers, boos and catcalls. The treasury benches had adopted this strategy in response to a similar behavior adopted by the opposition members during the parliamentary speeches of Prime Minister Imran Khan. In fact, the opposition has not allowed the prime minister to speak on the floor of the house since his first speech in the parliament in 2018. During the budget session, the treasury and opposition lawmakers later came to blows, a disgraceful situation after which both sides agreed to allow Shehbaz complete his budget speech on the fourth day. Following the truce, sources said, the premier is expected to speak in the parliament on June 30 (today). NA Speaker Asad Qaiser has also sought assurance from the leader of the opposition that there will be no disruption by the opposition parties during the premier’s speech. The NA secretariat and PML-N officials couldn’t be reached for comments.

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Prime minister to visit Uzbekistan in July

Prime Minister Imran Khan will visit Uzbekistan in July 2021 to enhance bilateral trade and economic ties. Besides offering business opportunities, Uzbekistan will also prove to be a gateway for Pakistan to other Central Asian countries. In return, Pakistan can offer its seaport to the landlocked country for trade. Adviser to Prime Minister on Commerce, Textile, Industries, Production and Investment Abdul Razak Dawood will also accompany the premier during the trip. “It has been an eventful year for Pakistan and Uzbekistan’s trade relations,” Dawood said in remarks made to The Express Tribune. The current momentum of trade and economic relations would go a long way in cementing bilateral ties for the benefit of both countries, said Dawood. He stressed that Uzbekistan could become Pakistan’s gateway to Central Asia as it shared borders with Turkmenistan, Kazakhstan, Tajikistan, Kyrgyzstan and Afghanistan. According to him, the improvement in bilateral trade relations with Tashkent can enhance Pakistan’s exports to the Central Asian region, which has a trade potential of $90 billion. Earlier in May 2021, the first-ever consignment of export goods from Islamabad reached Tashkent under the TIR Convention. In September 2020, Uzbekistan Deputy Prime Minister for Investments and Foreign Trade Sardor Umurzakov visited Pakistan and met Dawood. During that visit, the Joint Working Group on Trade and Economic Affairs was established to explore possibilities of a preferential trade agreement (PTA) between the two nations. Both sides vowed to cooperate in fields of trade, communications, banking, maritime and investment. In addition, Pakistan agreed to facilitate the movement of Uzbek trade shipments through local seaports. As part of a fast-track approach, Dawood visited Tashkent earlier this year with an inter-governmental delegation. The two countries will hold a Joint Ministerial Commission (JMC) meeting in Tashkent on July 14, 2021 followed by Pakistan-Uzbekistan Trade, Investment and Connectivity Conference on July 15-16. The conference will be inaugurated by Prime Minister Imran Khan and the president of Uzbekistan. Published in The Express Tribune, June 30th, 2021. Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

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Musk says may need $30 bln to keep Starlink in orbit

BARCELONA: Billionaire entrepreneur Elon Musk said on Tuesday that his Starlink satellite internet venture was growing quickly as he forecast total investment costs in the business at between $20 billion and $30 billion.

Without disclosing details, he also said Starlink has “two quite significant partnerships with major country telcos” that could help the SpaceX division plug gaps in fifth-generation mobile and cellular networks.

The Tesla Inc CEO and founder of SpaceX, a rocket ship venture that seeks to colonise Mars, said investment costs before Starlink achieves fully positive cash flow would be $5-$10 billion.

“It’s a lot, basically,” Musk said in a video interview from California with the Mobile World Congress, the telecoms industry’s largest annual gathering, which is being held in Barcelona.

Starlink, an array of low-orbit satellites offering high-speed, low-latency connectivity, is already offering a trial service and aims to cover the world, except for the north and south poles, starting in August, Musk said.

It has more than 1,500 satellites aloft and is operating in about a dozen countries, adding more every month. Musk forecast total customer numbers would reach half a million over the next 12 months, from 69,000 now.

Some analysts question whether satellite internet can be a viable business model because it mainly targets remote areas, where there may not be enough people able to pay the high tariffs needed to recoup the investment costs.

Starlink would need a few million subscribers paying about $99 a month each to recoup a $5 billion investment in a year’s time, said analyst Tim Farrar, president of TMF Associates.

A $30 billion investment over a decade would not require a dramatic rise in subscribers, but to achieve Musk’s 2020 projection of roughly $30 billion revenue a year would require tens of millions of subscribers, he said.

“It is not implausible to get this number (a few million) to make the system not to go bankrupt. But this is not enough to justify the valuation of SpaceX,” he said.

“The more Elon talks up that he is going to invest tens of billions, the harder it becomes for other people. Obviously, that’s the big part of Musk’s objective: to limit competition.”

Starlink faces competition from Amazon.com Inc subsidiary Kuiper, OneWeb – a collapsed satellite operator rescued by the British government and India’s Bharti Group, as well as Telesat and a number of others.

Paolo Pescatore, an analyst at PP Foresight, said Starlink needed scale which would lower costs: “hence the need to partner with telcos.”

PARTNERSHIP

Musk said he was talking to possible partners as a number of countries require operators to provide rural coverage as conditions of their 5G licences.

He also said if telecom operators have cellular stations in remote regions, they can use Starlink to allow them to connect to core networks.

The rapid spread of wireless and terrestrial broadband, along with high prices, were significant factors in killing previous low-Earth-orbit satellite ventures.

Starlink is selling terminals for half price, Musk said, adding he expects to bring down terminal costs from over $1,000 to $300-500 in the next 12 months.

“If we succeed in not going bankrupt, then that’ll be great, and we can move on from there,” he said.

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‘World must remove 1 bln tonnes CO2 by 2025 to meet climate goal’

Projects in development will remove only a fraction of the amount of carbon dioxide (CO2) from the air that needs extracting by 2025 to meet the global Paris climate target and avert catastrophic warming, a report said on Wednesday.

More than 190 countries have signed the Paris agreement designed to limit global warming to 1.5 degrees Celsius, but even with pledges of big reductions in emissions many scientists believe removal technologies will be needed to meet the goal.

“Without action to deliver 1 Gigatonne (Gt) of negative emissions globally by 2025, keeping global warming within the Paris Agreement target of 1.5°C cannot be achieved,” said the report by the Coalition for Negative Emissions (CNE), and consultancy firm McKinsey.

It said countries will need to remove a billion tonnes of CO2 from the atmosphere by 2025, if the Paris target is to be met, and more than one billion tonnes annually thereafter.

The current pipeline of projects in development could remove only around 150 million tonnes of CO2 by 2025, well short of what’s needed, the report said.

Negative emission projects include bioenergy with technology to capture and storage carbon emissions, technology to directly capture and store emissions from the air and natural climate solutions such afforestation.

Currently removal technology is expensive and while many countries around the world have initiatives in place to put a price on CO2 emissions, the prices are far too low to incentivise new projects.

The report said scaling up the technology would lead to lower costs, with a likely average cost of 30-100 pounds($41-138) per tonne of CO2 removed by 2050.

Will Gardiner, CEO of coalition member Drax, which is seeking to develop an emissions negative power plant using biomass and carbon capture, said countries could help to pay for the technology by awarding tax credits for each tonne of CO2 removed.

Other members of the CNE, which includes over 20 companies, investors and trade associations, include Bank of America and the Confederation of British Industry (CBI).

($1 = 0.7234 pounds)

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Saudi Arabia plans new national airline as it diversifies from oil

Saudi Arabia’s Crown Prince Mohammed bin Salman announced plans on Tuesday to launch a second national airline as part of a broader strategy to turn the kingdom into a global logistics hub as it seeks to diversify from oil.

The creation of another flag carrier would catapult Saudi Arabia into the 5th rank globally in terms of air transit traffic, official state media reported, without giving details on when and how the airline would be created.

Prince Mohammad has been spearheading a push for Saudi Arabia, the biggest Arab economy and the largest country in the Gulf geographically, to boost non-oil revenues to about 45 billion riyals ($12.00 billion) by 2030.

Making the kingdom a global logistics hub, which includes the development of ports, rail and road networks, would increase the transport and logistics sector’s contribution to gross domestic product to 10% from 6%, state news agency SPA said.

“The comprehensive strategy aims to position Saudi Arabia as a global logistics hub connecting the three continents,” Prince Mohammed was quoted as saying in the SPA report.

“This will help other sectors like tourism, haj and umrah to achieve their national targets.”

The addition of another airline would increase the number of international destinations from Saudi Arabia to more than 250 and double air cargo capacity to more than 4.5 million tonnes, the SPA report said.

With current flag bearer Saudi Arabian Airlines (Saudia), the kingdom has one of the smallest airline networks in the region relative to its size. Saudia has struggled with losses for years and like global peers, has been hit hard by the coronavirus pandemic.

Local media reported earlier this year that the kingdom’s sovereign wealth fund, the Public Investment Fund, (PIF), planned to build a new airport in Riyadh as part of the new airline launch, without giving further details.

The fund is the main vehicle for boosting Saudi Arabian investments at home and abroad as the young prince, known in the West as MbS, seeks to diversify the kingdom’s oil-heavy economy through his Vision 2030 strategy.

($1 = 3.7503 riyals)

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27 more Pakistanis die of COVID-19 during last 24 hours

ISLAMABAD: Pakistan has reported 27 more deaths over the last 24 hours by COVID-19 as the total number of the fatalities has reached 22,281, ARY News reported on Wednesday. 

According to the latest figures issued by the National Command and Operation Centre (NCOC), the number of positive cases has surged to 957,371 after the inclusion of 979 fresh infections during the said period.

The country conducted 42,062 tests in the past 24 hours out of which 979 Pakistanis were tested positive for the disease. The COVID positivity ratio was recorded at 2.3%

The number of active cases in Pakistan currently stands at 31,606.

Overall 903,484 Pakistanis have recovered their health back from the COVID-19 pandemic, while 1,871 are still said to be critical.

As of June 30, as many as 12,641,654 people have been partially vaccinated against the deadly infection while 2,939,748 fully vaccinated, the NCOC said.

A total of 15,581,402 doses of COVID-19 vaccine have been administered across Pakistan thus far.

Read more: COVID-19 VACCINATION: HERE’S HOW YOU CAN VERIFY YOUR CERTIFICATE

Pakistan has primarily used Chinese vaccines – Sinopharm, CanSinoBio and Sinovac– in its inoculation drive and, earlier this month began allowing those under 40 to receive AstraZeneca, of which it has a limited supply meant for people traveling to countries that require it.

Pakistan has so far granted emergency use authorization to six different vaccines, including China’s Cansino, Sinopharm, Sinovac, Russian Sputnik V, European AstraZeneca and US Pfizer vaccines.

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